As per IRDA Cession means the unit of insurance passed to a reinsurer by the insurer which issued a policy to the original insured, and accordingly, a cession may be the whole or a portion of a single risk, defined policies or defined divisions of business, as agreed in the reinsurance contract.

As per IRDA’s General Insurance-Reinsurance Regulations, 2000 “Facultative” means the reinsurance of a part or all of a single policy in which cession is negotiated separately and that the reinsurer and the insurer have the option of accepting or declining each individual submission.

A series of financial tests developed by the National Association of Insurance Commissioners (NAIC) under its Insurance Regulatory Information System (IRIS) to assist states in overseeing the financial soundness of insurance companies.